DCIT 1(1), MUMBAI V. HDFC INVESTMENT LTD, MUMBAI

ITA 3175/MUM/2011

• Counselvise Citation: 317519914 RSA 2011
• Duration Of Justice: 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 26-03-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 21-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, H, MUMBAI BEFORE SHRI DINESH KUMAR AGARWAL (JM) AND B.RAMAKOT AIAH(A.M) ITA NO.3175/MUM/2011 (ASSESSMENT YEAR: 2007-08) JOINT COMMISSIONER OF INCOME TAX, (OSD)-1(1), ROOM NO.533 & 579, AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020 M/S HDFC INVESTMENTS LTD., RAMON HOUSE, H.T. PAREKH MARG, MUMBAI-400020. PAN: AAACH1462L APPELLANT V/S RESPONDENT DATE OF HEARING : 26.3.2012 DATE OF PRONOUNCEMENT : 11.4.2012 APPELLANT BY : SHRI ABHINAY KUMBHA R RESPONDENT BY : NONE O R D E R PER DINESH KUMAR AGARWAL (JM) THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AG AINST THE ORDER DATED 4.11.2010 PASSED BY THE LD. CIT(A ), FOR THE ASSESSMENT YEAR 2007-08. 2. IN THIS CASE, THE DATE OF HEARING WAS FIXED FOR 26.3.2012. HOWEVER, AT THE TIME OF HEARING, NONE WAS PRESENT O N BEHALF OF THE ASSESSEE NOR FILED ANY APPLICATION FOR ADJOURNM ENT OF THE CASE. THEREFORE, IT WAS DECIDED TO DISPOSE OF THE APPEAL EX- ITA NO.3175/MUM/2011 (AY: 2007-08) 2 PARTE, QUA THE ASSESSEE, ON MERITS, AFTER HEARING THE LEARNED D.R. 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE COMPANY IS AN INVESTMENT COMPANY. DURING THE COURS E OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE A SSESSEE HAS EARNED TAX FREE DIVIDEND INCOME OF RS.16,50,00 ,000/-. ON BEING ASKED AS TO WHY DISALLOWANCE U/S 14A OF THE INCOME TAX ACT, 1961 (THE ACT) SHOULD NOT BE MADE, THE ASS ESSEE EXPLAINED THAT NO EXPENDITURE HAS BEEN INCURRED TO EARN THE DIVIDEND INCOME. HOWEVER, THE AO DID NOT ACCEPT THE ASSESSEES EXPLANATION. THE AO IN VIEW OF THE DECIS ION OF THE SPECIAL BENCH OF THE TRIBUNAL IN ITO V/S DAGA CAP ITAL MANAGEMENT PVT. LTD. (2009) 312 ITR (AT) 1 (MUM) (S B) AND OTHER DECISIONS WORKED OUT DISALLOWANCE U/S 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES, 1962( T HE RULES) RS.43,46,287/- AS PER WORKING APPEARING AT PAGE 3 OF THE ASSESSMENT ORDER. HOWEVER, KEEPING IN VIEW THAT T HE TOTAL EXPENDITURE RS.15,30,488/- THE AO RESTRICTED THE D ISALLOWANCE TO RS.15,30,488/-. ON APPEAL, THE LD. CIT(A) FOLLO WING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE LTD. MFG. CO. V/S DCIT (2010) 328 IT R 81 (BOM), HOWEVER, SET ASIDE THE ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO THE AO TO PROVIDE REASONABLE OPPORTUN ITY TO THE ITA NO.3175/MUM/2011 (AY: 2007-08) 3 APPELLANT AND WORK OUT THE TOTAL EXPENDITURE I.E. DIRECT INDIRECT BOTH IN RELATION TO EXEMPT INCOME AND MAKE THE DIS ALLOWANCE IN ACCORDANCE WITH THE DECISION OF THE HONBLE JURI SDICTIONAL HIGH COURT (SUPRA). 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE REVENUE IS IN APPEAL BEFORE US TAKING FOLLOWING GRO UNDS : 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN RE JECTING THE AOS WORKING OF EXPENSES U/S 14A AS PER RULE 8D BY OBSERVING THAT JURISDICTIONAL HIGH COURT IN THE CAS E OF GODREJ BOYCE MFG.CO. LTD. HAS DECIDED THIS ISSUE TH AT RULE 8D WILL BE APPLICABLE ONLY FROM AY 2008-09 ONWARDS. 1.1 THE DECISION OF THE HONBLE HIGH COURT IN THE C ASE OF GODREJ & BOYCE HAS NOT BEEN ACCEPTED & SLP HAS BEEN FILED AGAINST THE SAID DECISION. 5. AT THE TIME OF HEARING, THE LD. DR SUPPORTS THE ORDER OF THE AO. 6. WE HAVE CAREFULLY HEARD THE SUBMISSIONS OF THE LD.DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE QUESTION OF MAKING DISALLOWANCE U/S 14A IS NO MORE RES INTEGRA IN VIEW OF THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN GO DREJ & BOYCE LTD. MFG. CO. (SUPRA) HOLDING THAT THE PROVIS IONS OF SECTION 14A ARE APPLICABLE IN CIRCUMSTANCES AS ARE PREVAILING PRESENTLY AND THE DISALLOWANCE HAS TO BE WORKED OUT BY THE AO ON SOME `REASONABLE BASIS AND NOT UNDER RULE 8D. U NDER SUCH ITA NO.3175/MUM/2011 (AY: 2007-08) 4 CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN DIRECTING THE AO TO DECIDE THE QUANTU M OF DISALLOWANCE, AS PER THE AFORE-NOTED JUDGMENT, AFTE R ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. THE GROUNDS TAKEN BY THE REVENUE ARE, THEREFORE, REJECT ED. 7. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 11TH APRIL, 2012. SD SD ( B.RAMAKOTAIAH ) ( DINESH KUMAR AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, 11TH APRIL, 2012 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI